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Least Affordable Metros for Homeownership

The past year has been volatile for the U.S. housing market, and last week the Commerce Department revealed that March’s 14.5% monthly drop in sales of new single-family homes was driven primarily by buyers’ inability to come up with the cash. Homeownership, that bedrock of the American dream, appears increasingly elusive.

Most would-be homebuyers are in difficult spot—not only do they face a sluggish economy and tight lending standards, they’re also seeing rapidly increasing home prices as higher-income shoppers push up prices in many metropolitan areas. Compare this list to our ranking of Most Affordable Metros for Homeownership.

Methodology

NerdWallet looked at more than 100 U.S. metro areas to determine where homeownership is the least feasible for the average consumer. By dividing the home sale price by the median household income in each metro area, we determined the affordability of homeownership.

Put simply, the higher the ratio of median home price to household income, the less affordable the metro area is.

In a market with rising home prices and tight credit, it is increasingly important that consumers are aware of their homeownership options. Learn more about current mortgage rates and mortgage refinancing options in our mortgage guide, as well as whether it’s best to rent or buy.

1. Boulder, Colo.
With a home price-to-income ratio of 6.1, Boulder is the most expensive small metro area. To address this, the City of Boulder has three programs to encourage homeownership: Homeworks, Solution Grant and House to Homeownership (H2O).

For nonprofits and organizations struggling with the high cost of homeownership in the Naples-Marco Island metro area, Collier County offers grant funding for permanent and temporary housing through its Collier County Continuum of Care Grant Program.

3. Barnstable Town, Mass.
Since 2013, Barnstable Town has seen a 9% increase in home prices, with only a 3% growth in household income. To address the increasing cost of living, Cindy Dabkowski, the Affordable Apartment Coordinator of Barnstable’s Growth Management Department has led an effort to make 10% of the total housing stock affordable to low- and moderate-income households through the Accessory Affordable Apartment Program.

4. Burlington-South Burlington, Vt.
Burlington-South Burlington shows up on our list again this year with a home price-to-income ratio of 4.6 (same as last year). To address home affordability concerns, the South Burlington Affordable Housing Committee this month published a report detailing plans to increase housing access to low-income families.

1. Honolulu, Hawaii
Honolulu was the least affordable metro area last year, and this year it is again one of the least affordable, with a home price-to-income ratio of 9.2.

But residents shouldn’t despair. The 162-unit Rycroft Terrace, set to open this month, will offer units priced between $123,480 and $274,990—quite a bit below the median home price of $661,500. Rycroft Terrace’s developer, Peter Savio, has promised that applicants making 30% or less of Honolulu’s median income will get priority housing.

In addition, the state of Connecticut launched CTHousingSearch.org in 2007 to help residents find housing anywhere in the state, including affordable housing options. Connecticut residents also have access to the Housing Development Fund, a program with $93 million in management to fund affordable housing projects.

3. Charleston-North Charleston, S.C.

Though the Charleston-North Charleston metro area is third on our list, residents have many resources to turn to. In fact, according to the Housing Authority of Charleston, almost 10% of residents in the city sleep in housing provided by the agency. Mercy Living also provides affordable housing options for families, seniors and those with special needs.

4. Sarasota-Bradenton-Venice, Fla.

Sarasota is known for its temperate weather and beautiful beaches, but it is also fourth on our list with a home price-to-income ratio of 4.2. Residents can turn to the Sarasota Office of Housing and Community Development, as well as apply for public housing through the Sarasota Housing Authority, which currently owns 407 units reserved for low-income families.

Large Metro Areas (Population over 1,000,000)

Metro Area

Median Household Income

Median Home Price

Home Price to Income Ratio

1

Anaheim-Santa Ana-Irvine, CA

$60,583

$651,640

10.8

2

San Francisco-Oakland-Fremont, CA

77,183

679,240

8.8

3

San Jose-Sunnyvale-Santa Clara, CA

89,940

780,000

8.7

4

San Diego-Carlsbad-San Marcos, CA

63,373

464,280

7.3

5

New York-Wayne-White Plains, NY-NJ

65,791

465,700

7.1

6

Los Angeles-Long Beach-Santa Ana, CA

60,583

405,580

6.7

7

New York-Northern New Jersey-Long Island, NY-NJ-PA

65,791

391,800

6.0

8

Boston-Cambridge-Quincy, MA-NH

72,769

375,900

5.2

9

Miami-Fort Lauderdale-Miami Beach, FL

48,582

246,000

5.1

10

Seattle-Tacoma-Bellevue, WA

67,437

336,300

5.0

Median

6.9

Min

5.0

Max

10.8

1. Anaheim-Santa Ana-Irvine, Calif.
The Anaheim-Santa Ana-Irvine metro area is the most expensive place to own a home in the United States, with a median home price more than 10 times the median household income.

With recent protests against the tech industry, San Francisco is becoming notorious for its housing shortages and rising cost of homeownership. However, residents should note that there many available resources that they can turn to for advice, including the San Francisco Housing Authority. Moreover, recent moves by the Board of Supervisors to strengthen the penalties for evictions under the Ellis Act and by the Mayor’s Office of Housing and Community Development to give preference to evicted tenants aim to address the housing crisis.

While the San Diego-Carlsbad-San Marcos metro area is known for its proximity to beautiful beaches, it also comes with high home prices. Thankfully, residents have a few organizations to turn to. In San Diego, residents can ask for advice from the San Diego Housing Commission, which owns more than 2,000 affordable housing units. Carlsbad residents can apply for one of more than 2,000 affordable housing units through the City of Carlsbad Inclusionary Housing Ordinance. In San Marcos, residents can turn to the San Marcos Housing Authority, recognized as a “high performer” in 2013 by the Department of Housing and Urban Development, and to the Affordable Housing Advocates, which is led by attorney Catherine Rodman and supports housing initiatives for low-income families.

Key Trends

Least affordable metros tend to be metros with high income disparities

In areas of high income disparities, high-earners push up home prices – often to the point where the average resident cannot easily afford homes.

This is less true in areas of low income disparity, where to-be homeowners tend to have more similar buying power.

Increases in home prices are driving the decrease in home affordability

While household income has increased slightly year-on-year, home prices have grown at a faster rate—leading to a drop in affordability.

For example, home prices in Bridgeport-Stamford-Norwalk, Ct., and San Francisco-Oakland-Fremont, Calif., have increased by 6% and 14%, respectively, while household income in each area has only increased by just 3%.

The most affordable metro areas are more than twice as affordable as the least affordable metro areas

This year, the top 30 least affordable metro areas by population have a home price-to-income ratio of 4.7, more than double the ratio of 2.3 for the top 30 most affordable metro areas.

Californians have to put up with the least affordable housing

Orange, San Francisco, San Diego and Los Angeles counties hold four of the top five spots among the least affordable large metro areas.

Data came from the US Census and the National Association of REALTORSTownhomes image from Shutterstock

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